Private credit growth inches lower in September

Siddique Islam | Published: November 02, 2018 09:56:14 | Updated: November 05, 2018 11:10:57


File photo used for representational purpose

Private sector credit growth fell slightly in September due to lower demand for loans ahead of the national elections, bankers said.

Most of the banks are maintaining a 'go-slow' policy for loan disbursement as they will need to comply with the central bank's revised advance-deposit ratio (ADR) rules to be effective by March 2019, they added.

The growth in credit flow to the private sector came down to 14.67 per cent in September 2018 on a year-on-year basis from 14.95 per cent a month ago, according to the central bank's latest statistics.

The private sector credit growth was 15.87 per cent in July 2018.

This growth was more than 2.0 percentage points lower than the Bangladesh Bank (BB)'s target of 16.8 per cent for the first half (H1) of the current fiscal year.

Talking to the FE, Mosleh Uddin Ahmed, Managing Director (MD) and Chief Executive Officer (CEO) of NCC Bank Limited, said some clients have also maintained a 'wait-and-see' policy for receiving fresh credit ahead of the next elections.

The banks having ADR above the re-fixed limit are now following a conservative approach towards disbursing fresh credit to comply with the revised ADR rules, the senior banker explained.

"The credit growth to the private sector may rebound from March 2019 after the formation of a new government," Mr. Ahmed predicted.

Talking to the FE, a senior official of the Bangladesh Bank (BB) said though the amount of private sector credit increased, it is on a decreasing trend in recent months.

"It's a seasonal impact. It will pick up again after the elections," the central banker noted.

The total outstanding loans with the private sector rose to Tk 9,187.45 billion in September 2018 from Tk 8,012.25 billion a year ago. It was Tk 9,101.66 billion in August 2018.

Earlier, the central bank had extended the deadline by three more months to implement the revised limit of ADR by the banks.

Under the extended timeframe, the banks having ADR above re-fixed limit are allowed to implement the revised limit of ADR by March 31, 2019 instead of December 31, 2018 earlier.

The ADR has been re-fixed at 83.50 per cent for all the conventional banks and at 89 per cent for the Shariah-based Islami banks. The existing ratios are 85 per cent and 90 per cent respectively.

siddique.islam@gmail.com

 

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